Some $1 billion in unclaimed refunds from that tax year are outstanding and if people don’t act, those refunds will become the property of the Treasury Department, the IRS said on May 6. The deadline for people to file their outstanding 2020 taxes is Friday, May 17, by 11:59 p.m.
The IRS had pushed back the tax deadline to file the 2020 refunds to May 17, 2021. It means that the normal, three-year-long window for filing those returns will close on Friday.
The IRS says that the median unclaimed refund is about $932, meaning that about half the refunds are more than that amount and about half are less. About 940,000 people are eligible, according to a March IRS estimate.
Meanwhile, the IRS has reassured taxpayers that it will impose no penalty on people claiming a late refund on a tax return that was filed late.
“There’s no penalty for failure to file if a refund is due. However, a return claiming a refund must be filed within three years of its due date for a refund to be allowed. After the expiration of the three-year period, the refund statute generally prevents the issuance of a refund check and the application of any credits, including overpayments of estimated taxes or withholding amounts, to other tax years that are underpaid,” the agency said on May 6.
The IRS has also said that a number of low-to-moderate-income workers might be eligible for the 2020 Earned Income Tax Credit that could be worth as much as $6,660 for taxpayers with children who qualify. Several other COVID-19-era rebates and credits are available, including for individuals who did not get a stimulus check, the IRS has noted.
“People faced extremely unusual situations during the pandemic, which may have led some people to forget about a potential refund on their 2020 tax returns,” Mr. Werfel said. “People may have just overlooked these, including students, part-time workers and others. Some people may not realize they may be owed a refund. We encourage people to review their files and start gathering records now, so they don’t run the risk of missing the May deadline.”
Taxpayers can learn if the IRS is still holding onto years-old refund money by filing a tax return for that year, according to the agency.
The IRS “Where’s My Refund” webpage and tool only reports the refund status to people who have filed their taxes in a given year. In order to file a 2020 return, a taxpayer will have to gather their necessary documents for that year, including a Form W-2 issued by an employer for that year.
Other documents can include a Form 1099 used to report payments for things such as freelance work, contracting, interest income, and a wide variety of income sources. Form 5498s may also be necessary for people reporting contributions to a retirement account.
“Another option is for people to file Form 4506-T with the IRS to request a ‘wage and income transcript,’” the IRS says. “A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498, and IRA contribution information.”
Taxpayers can use the information from the transcript to file their tax return. But the IRS cautioned that “these written requests can take several weeks,” meaning that it may be already too late for some. “People are strongly urged to try the other options first,” it says.
